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Short Sale Help

from Downingtown, Pennsylvania

posted over 3 years ago

Hey BP,

I just sent out some letters to pre-foreclosures and I have a feeling I will be dealing with a lot of these sellers.

Seller calls, wants to sell his house before its foreclosed on. Wants to save his credit. House is vacant. Bought it for 65k. Hasn't paid the mortgage in 6.5 years!!!! Owes the bank 172k. Wants to do a short sale but I have no idea how to, nor do I want to being new to investing. Can someone give me some guidance in this field?

Involved In Real Estate from Austin, Texas

replied over 3 years ago

Hi Shawn,

Short sales can be tricky - for your first one, I wouldn't try to do it on your own, but instead find an experienced Real Estate Agent in your area who can help. As a buyer, you won't have to pay any fees, and you can learn a lot through the process by watching someone who has done this before and asking them a bunch of questions that are specific to your situation and area.

Broker from Logan, Utah

replied over 3 years ago

Most banks, as a condition of the short sale, will require it to be listed. This means that you need to find an investor friendly agent with short sale experience. (You should have this as part of your team regardless.)

You need to have more information on the loan (and maybe you do) to see if this is worth pursuing. Reinstatement fees are not the same as payoffs. If you got to $172 by looking at a statement that had $65K principal balance and $107K "now due" this is not the number you will be negotiating.

Many banks will look at fair market value less a discount for condition and compare that to their internal needs.

Has a sale date been posted?

Remember, you have three opportunities to purchase this property: pre-foreclosure through a short sale (now), at the courthouse steps, and after the bank lists it as a REO if no one purchases it at the sale. Even if you can't get any traction on a short sale at this stage, if you are talking to the borrower, you have a tremendous advantage by being able to get inside and inspect the property. This gives you a much better idea than your competition, who will be buying blind, if it goes to sale.